Malaysia has been lauded for having several institutes that help young startups and grow the e-Commerce space in an interview between Livemint and David Gowdey of Singapore-based Jungle Ventures.
“Notable ones include the Selangor Information Technology and E-Commerce Council (SITEC) and the Malaysian Global Innovation and Creativity Centre (MaGIC), focusing on e-commerce and startups, respectively,” noted Gowdey, who also mentioned SITEC’s programmes for freshman entrants in the e-Commerce scene, such as Online 100, Apps 100, E-Commerce Education, and the Top E-Commerce Merchant Awards, among other events. MaGIC’s achievements and aims of catalysing entrepreneurship and helping startups to grow globally were also commended, with mentions made to the organisation’s efforts to match venture capitalists with startups, as well as the organisation’s collaborations with Stanford University.
Gowdey also made mention of government-backed initiatives in Indonesia (1000 startups movement), and Thailand (who has pledged a US$570 million venture capital fund to grow the local ecosystem), with the intention of showcasing the amount of support for e-Commerce and startups in the region of Southeast Asia (SEA).
SEA Market “under-penetrated” by VC funding
This comes after a report from Jungle Ventures which notes that Southeast Asia is under-penetrated by venture capital funding, despite SEA’s addressable market being roughly equivalent to the tier-1 cities in India.
The report by Jungle Ventures, which compared the Indian market to the SEA regional market, noted that India, despite a perceived weaker business and innovation environment than SEA, received US$6.4 billion in VC funding in the 12 months to June, compared to SEA’s US$1.6 billion for the whole region.
The report noted that the common argument against increasing the amount of VC funding in SEA is because it is a region of six different key countries and six different markets, compared to India’s one collective market.
“While we obviously agree that founders and teams have to work quite hard to establish a regional business in SEA, given the complexity of the countries, we believe the opportunity to create large scalable businesses is sizable and will only increase over time,” noted Gowdey.
However, he also acknowledged that, while India is not exactly a uniform market since significant variances exist in language, social nuances and local permits or regulations across parts of India, these are not major hindrances to business growth if solved smartly, especially since most of the VC funding in India is going to technology and Internet-driven businesses.
“Apart from very few sub-categories such as financial services, transportation, etc., most other business models have low dependence on regulations and government and, therefore, this concern is overstated,” clarified Gowdey.
The shortage of engineering talent in SEA was also addressed, with Gowdey seeing a positive change over the last few years.
“There appear to be more US-educated locals coming back in the market, as well as local startups beginning to attract more world-class talent,” noted Gowdey, who added that local markets are now much more aware of engineering as a skill set in demand.
Gowdey also noted that, while India represents an enormous opportunity for Internet companies due to its large enough domestic ecosystem which is able to support and sustain very large businesses, the population of a country should not be viewed in absolute terms.
“When assessing the scale of the opportunity a country or market presents, one must look at the real addressable market size and the spending power within that base—i.e. rural consumers versus urban consumers are very different,” said Gowdey, who added that a recent study by Goldman Sachs reveals the urban middle class represents only 5% of the Indian population, about 27 million people.
Still, Gowdey revealed that Jungle Ventures was very bullish on Indian startups, and are targeting about 20% of the portfolio to be invested there. However, the venture capital firm would also be leaning towards investing in companies that they can help to expand operations to include SEA.